CCAASSEE SSTTUUDDIIEESS - International Business Environment Academic Year 2010-2011
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011-IBE-Siegen-Cases.docx
Academic Year 2010-2011
International Business Environment
Jean-Guillaume DITTER, PhD
Groupe ESC Dijon Bourgogne
CASE STUDIES
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011-IBE-Siegen-Cases.docx
Contents
Text 1. China backs away from Unocal bid ....................................................................................... 3
Text 2. China and US head for trade war .......................................................................................... 4
Text 3. Let me entertain you ............................................................................................................. 6
Text 4. Playing with fire ..................................................................................................................... 7
Text 5. Ford sells Volvo to Chinese group ......................................................................................... 8
Text 6. Status symbol ........................................................................................................................ 9
Text 7. US Prevails in Trade Dispute With China ............................................................................. 10
Text 8. Complex Future for China Brazil Trade Relations................................................................ 11
Text 9. Kraft and Cadbury - Chocs away.......................................................................................... 12
Text 10. Europe's textile war with China – and itself ........................................................................ 13
Text 11. Chinese light-bulb imports spark EU controversy ............................................................... 14
Text 12. Europe accused of protectionism........................................................................................ 16
Text 13. George Bush, protectionist ................................................................................................. 16
Text 14. US urges the EU to postpone its retaliation on steel tariffs ................................................ 17
Text 15. WTO upholds steel duty ruling ............................................................................................ 18
Text 16. US steel tariffs: Q & A .......................................................................................................... 19
Text 17. White House Signals Reverse of Steel Tariffs ...................................................................... 20
Text 18. EU and South Korea sign free trade deal ............................................................................ 21
Text 19. EU-South Korea Free Trade Agreement .............................................................................. 22
Text 20. EU agrees trade deal with South Korea............................................................................... 23
Text 21. EU and South Korea Sign Trade Pact ................................................................................... 23
Text 22. EU trade pact with South Korea faces criticism .................................................................. 24
Text 23. EU-South Korea FTA alarms Japanese firms ........................................................................ 25
Text 24. Southeast Asian Nations Talk of Economic Union............................................................... 26
Text 25. ASEAN: business as usual .................................................................................................... 26
Text 26. Afta Doha............................................................................................................................. 28
Text 27. China Uses Rules on Global Trade to Its Advantage............................................................ 30
Text 28. Poland’s Currency Lifts Economy ........................................................................................ 31
Text 29. Latvia's EU handcuffs........................................................................................................... 33
Text 30. Russia and Western clubs: no thanks, Geneva.................................................................... 35
Text 31. IKEA sets its sights on Russia's markets *…+ ........................................................................ 36
Text 32. IKEA expansion in Russia stalled.......................................................................................... 37
Text 33. Ikea says halting Russian expansion due to corruption ...................................................... 38
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011-IBE-Siegen-Cases.docx
Text 1. China backs away from Unocal bid
By David Barboza, New York Times, Wednesday, August 3, 2005
SHANGHAI — CNOOC, the giant state-owned Chinese oil company, said Tuesday that it had
withdrawn its $18.5 billion takeover bid for the American oil company Unocal because of fierce
political opposition in Washington. The decision ended a hotly contested battle between Unocal and
Chevron, the second-largest U.S. oil company, which were both vying to acquire Unocal's valuable oil
and natural gas assets, most of which are based in the United States and Asia. "This political
environment has made it very difficult for us to accurately assess our chance of success," CNOOC said
in a statement, "creating a level of uncertainty that presents an unacceptable risk to our ability to
secure this transaction."
The move by CNOOC, or China National Offshore Oil Corp., clears the way for Chevron to finalize its
acquisition of Unocal for about $17 billion in cash and stock. Unocal shareholders are expected to
vote on whether to accept Chevron's bid on Aug. 10. CNOOC's all-cash bid for Unocal in late June was
the largest takeover attempt ever made in the United States by a Chinese company. It came just two
months after Chevron and Unocal had already agreed to a merger, sparking a takeover battle that
eventually forced Chevron to sweeten its bid to $17.6 billion in cash and stock from $16.8 billion.
Politicians in Washington came out in strong opposition to CNOOC's efforts to win Unocal, saying the
state-owned oil company was acting as a proxy for the Chinese government and seeking to secure
strategically valuable U.S. energy assets. The monthlong fight between the companies that ensued
came to symbolize the growing trade and political tensions that have emerged this year between
China and the United States.
People involved in the CNOOC bid said that China's largest offshore oil and natural gas company was
determined to acquire Unocal, and that CNOOC's board was even considering raising its already
superior cash offer to as much as $20 billion this week to edge Chevron out of the bidding. But in the
end, CNOOC officials said they were reluctant to go that high amid signs that Washington remained
unlikely to approve the deal. Some American lawmakers have said they would push legislation that
would effectively block a Chinese takeover of Unocal.
Analysts said the failed attempt by CNOOC could further strain relations between the United States
and China and might intensify trade and currency disputes between the two countries. Chinese
experts accused Washington politicians of wrecking the deal and said the failed bid could affect other
Chinese companies seeking to do business in the United States. "The way the U.S. government has
treated CNOOC and politicized the deal will largely frustrate Chinese companies," said Han Xiaoping,
the chief information officer at Falcon Power, an energy consulting firm that is based in Beijing. "The
companies not only in oil but all other industries will not want to play the game by the U.S. rules," he
said.
The two countries – which are increasingly important economic and trade partners – also lead the
world in oil consumption. But China's economy is growing at a rapid clip, driving its state-owned oil
and energy companies to scouring the globe in recent years for new sources of energy. CNOOC has
been one of China's most aggressive companies in that regard. It has been on an acquisition hunt for
the past few years. Its bid for Unocal - the most ambitious yet - was dubbed "Operation Treasure
Ship," and it came with tremendous financial support from Wall Street's leading banks and China's
state-owned banks, which were prepared to give CNOOC billions of dollars worth of low-interest
loans to acquire the American oil company.
The Chinese government and CNOOC officials insisted that the takeover bid was solely a commercial
deal and had nothing to do with politics.
CNOOC officials pleaded with officials in Washington and at Unocal, saying that they were simply
attempting a "friendly" takeover of Unocal with a higher bid and would even pay the $500 million
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breakup to Chevron if Unocal agreed to break its earlier agreement with Chevron, according to
people involved in CNOOC's talks to acquire Unocal. The people declined to be named because of the
confidential nature of the talks.
CNOOC officials also said they were even willing to dispose of most of the U.S.-based assets of Unocal
if that would win U.S. government approval. What is more, CNOOC hired high-powered Washington
lobbyists and had the backing of two of Wall Street's most powerful investment banks, Goldman
Sachs and J.P. Morgan, to help push its deal for Unocal. But Chevron came to the negotiating table
equally armed, having hired Morgan Stanley and Lehman Brothers to advise it in its bid. A host of
congressmen who were recipients of Chevron political donations also argued in Washington against
the CNOOC deal, saying such a deal could threaten America's long-term energy interests, these
people said.
CNOOC's chairman, Fu Chengyu, still held out some hope in the last few days. The company held
lengthy conference calls with people involved in the deal, hoping to work out a higher bid. But the
political opposition in Washington appeared too difficult to overcome. "It was an agonizing process,"
said one person involved in the talks. "We thought we could win. The frustrating thing was how
much of a political firestorm do you want? Even if we did win, could the deal be delayed and drag
on? The political risks became so difficult to ascertain."
One official working with CNOOC said company officials said that even if Unocal accepted the CNOOC
bid, there were fears that Congress might pass legislation to block the deal. Several people who
worked for CNOOC said company officials had grown increasingly grim in recent days, and were
visibly angry at how the deal had collapsed. One official said Fu, the chairman, had long argued in
company meetings that CNOOC ought to avoid countries in Africa and the Middle East because of the
political risks associated with some countries there. They said Fu had pushed to make an acquisition
in the United States because the political risk would be very small.
"This is a pretty rude awakening," one person involved in the CNOOC deal said. "The political risk
turned out to be higher in America."
Text 2. China and US head for trade war
China could face censure at the World Trade Organisation after the US and Europe lodged a
joint complaint over its restrictions on raw materials exports
Heather Stewart guardian.co.uk, Tuesday 23 June 2009
Checking aluminium cans in Texas
China has put restrictions on exports of the aluminium ore bauxite as
well as zinc and magnesium
Gary Gladstone/Corbis
Europe and the United States announced last night co-ordinated action against China for busting
World Trade Organisation (WTO) rules by restricting exports of essential raw materials, raising fears
of a damaging east-west trade war in the depths of the global recession. Ron Kirk, the US trade
representative, accused Beijing of putting a "giant thumb on the scale" by restricting exports of
commodities including silicon, coke and zinc, to give Chinese manufacturers an unfair advantage over
their international rivals. "It's our job to make sure we remove that thumb from that scale," he said
in Washington. "Today's action is proof of our commitment to level the playing field in this area."
The US, with Europe, announced that it would start formal "dispute resolution consultations" at the
WTO in Geneva, claiming China has breached the rules of the international marketplace. At a press
conference in Washington, Kirk said: "We will enforce the rights of American manufacturers, farmers,
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ranchers, services providers, and workers using the rules-based global trading system." Baroness
Ashton, Europe's trade commissioner, said: "The Chinese restrictions on raw materials distort
competition and increase global prices, making things even more difficult for our companies in this
economic downturn. I hope that we can find an amicable solution to this issue through the
consultation process."
China imposes restrictions, including minimum export prices and tariffs of up to 70%, on a range of
raw materials of which it is a major producer. The EU claims these not only break general WTO rules
on world trade, but specific promises China made when it joined the organisation in 2001, becoming
a fully fledged player in global markets. The US said China produced 336m tonnes of coke in 2008 but
only exported 12m tonnes. The raw materials are used in a range of key products, from steel to semi-
-conductors. Brussels said manufacturers and processors in Europe were at risk of going bust if the
flow of exports from China was not restarted. With oil prices rising rapidly, western governments
including Britain have become concerned that higher commodity costs could choke off the fragile
economic recovery, and they suspect China of deliberately stockpiling materials – in contravention of
WTO rules on free trade.
If countries cannot reach agreement under consultation, which can take up to 60 days, the WTO will
appoint a panel to examine the case and decide whether China is at fault. If Beijing then refused to
comply, Europe and the US could be given permission to impose trade sanctions. US officials said
they would, "press vigorously for redress". Taking China to the WTO marks a sharp deterioration in
relations between the world's largest trading powers. Sources in Geneva said: "In terms of trade
disputes, it doesn't get bigger than this." Gerard Lyons, chief economist at Standard Chartered, said
there was probably "an element of brinkmanship" involved but the tough economic climate made
any trade dispute alarming. "Everyone, policy-makers and markets, is a lot more sensitive to any
indication of protectionism issues, given the economic environment," he said. "It's not a good
situation."
G20 leaders pledged to resist protectionism at the London summit in April, but the US was infuriated
by Beijing's inclusion of a "Buy Chinese" clause in its huge fiscal stimulus programme (although the
US had a similar clause in its own stimulus), to ensure the money is spent at home. Democrats in
Congress have led an increasingly vocal campaign accusing China of controlling its currency to gain an
unfair advantage over its competitors. In his battle for the White House, Obama promised to defend
US rustbelt manufacturers against cut-price competition, and the mass layoffs since the global
recession have increased the pressure for action. Barack Obama's treasury secretary, Tim Geithner,
sparked an angry response from Beijing in January, when an official document accused China of
being a "currency manipulator" and deliberately depressing the value of the yuan – though the
language was later toned down.
With the Doha round of world trade talks at a standstill, the cooling of relations will underline fears
that the march of globalisation has been halted. The White House appears reluctant to restart
negotiations. Duncan Green, head of policy at Oxfam, said: "The danger is that this is how the Doha
round ends – not with a bang but with a dispute settlement mechanism."Kick-started Begun in 2001
in Qatar, in the wake of the terrorist attacks on New York, the Doha round was meant to give
developing countries a fair stake in the global trading system, but negotiations collapsed in Geneva
last summer, when India and the US could not agree on how much protection should be given to
poor farmers.
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Text 3. Let me entertain you
Aug 13th 2009, From The Economist print edition
A victory for America's news and entertainment industries
Chinese trade officials are hardly likely to be quaking in their boots over the ruling announced on
August 12th by a World Trade Organisation (WTO) dispute panel. The ruling upheld American
complaints that China breaks its trade commitments by the way in which it regulates the import and
distribution of foreign publications, films and music. The officials may reflect that this is, after all, the
third time the WTO has ruled against China in just over a year and the other cases—one on imported
automotive parts and another on counterfeiting—have not yet led to substantial changes in the way
business is done. But the latest ruling adds pressure in an especially sensitive area. It may force China
to start untangling the variety of motives behind its persistent effort to control the influx of foreign
cultural and information products.
Although China's markets have liberalised hugely over the years, the information-based industries
remain something of a special case. Virtually all print and broadcast media are government-run or
supervised, and subject to censorship by Communist Party propaganda officials. The internet is
closely monitored and a great deal of content is blocked. China's own film producers are likewise
kept on a short leash, as are book publishers. A common view among foreign executives in the news
and entertainment fields is that China's complex and maddening regulatory restrictions on the
import of their products have served a double purpose: both controlling objectionable content, and
protecting local industries. China limits the import of foreign films to no more than 20 each year. It
also requires that they be distributed through certain government-run companies. Similar
restrictions hamper the distribution of foreign books and magazines.
According to James McGregor, an author and former Beijing-based media executive, the case means
China's commercial interests are now bumping up against its propaganda interests. China, he said,
was looking at all this with one eye open and the WTO is now telling them they have to look at it with
both eyes. In the case of films, foreign offerings certainly do pose a competitive challenge to home-
grown Chinese products. In Chinese cities there is a vast trade, illegal but barely hidden, in pirated
DVDs of Hollywood movies selling for about $1. Nor can there be doubt that Chinese cinema-goers
would continue buying the rather pricier tickets to the legal versions of those films, even if the yearly
limit were lifted.
A more open market for these goods could go a long way towards helping America cut its persistent
and politically troublesome trade deficit with China, which in the first half of 2009 ran to $103 billion.
But such hopes may have to wait. Ron Kirk, America's Trade Representative, praised the ruling as a
significant victory for America's creative industries. But China expressed regret at the ruling and
rejected its findings. A spokesman for the commerce ministry said that China's market channels for
publications and audiovisual products are extremely open, and that China may choose to appeal.
The WTO's dispute-resolution machinery turns slowly. America made this complaint in April 2007. It
was later joined by the EU, Japan, Australia and others. Having taken so long to reach this point, the
WTO will take a great deal longer to force compliance, especially if China does appeal. Mr McGregor,
meanwhile, advises China to open up bit by bit on films and other entertainment. Foreign hard-news
products, he reckons, can be blocked on other grounds, but entertainment has become a
commodity, like toasters or anything else. And besides, thanks to the black market in pirated
versions, most urban Chinese have already seen “Sex and the City”.
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Text 4. Playing with fire
Sep 17th 2009, From The Economist print edition
A protectionist move that is bad politics, bad economics, bad diplomacy and hurts America. Did we
miss anything?
Barack Obama’s decision to slap a 35% tariff on imported Chinese tyres looks like a colossal blunder,
confirming his critics’ worst fears about the president’s inability to stand up to his party’s special
interests and stick to the centre ground he promised to occupy in office. *…+ Last year the fear was
that Mr Obama would give in to enormous protectionist pressure from Congress. By introducing the
levy, Mr Obama has pandered to a single union, one that does not even represent a majority of
American tyre-industry workers, and he has done so against the interests of everyone else.
Politically, Mr Obama may have felt he had little choice. The United Steelworkers union filed the
complaint in April and the law required Mr Obama to decide by September 17th. Having promised
repeatedly to enforce trade laws more vigorously than Mr Bush, Mr Obama presumably felt he
needed to do something. The economic benefits to those who lobbied for protection, however, are
minuscule. Domestic manufacturers have largely abandoned the low-end tyre market. The tariffs,
which drop from 35% in the first year to 25% in the third, will mostly divert supply to Mexico, India,
Indonesia and Brazil. Consumers will have to pay more. The motor and garage trades will be harmed.
One might argue that these tariffs don’t matter much. They apply, after all, only to imports worth a
couple of billion dollars last year, hardly the stuff of a great trade war. China is incandescent with
rage; but China is a master of theatrical overreaction. Its actual response so far has been the minor
one of announcing an anti-dumping investigation into American chicken and car-parts exports. The
whole affair might blow over, much as did the furore surrounding George Bush’s selective steel tariffs
back in 2002. Presidents, after all, sometimes have to throw a bit of red meat to their supporters: Mr
Obama needs to keep the unions on side to help his health-reform bill.
That view seems naive. It is not just that workers in all sorts of other industries that have suffered at
the hands of Chinese competitors will now be emboldened to seek the same kind of protection from
a president who has given in to the unions at the first opportunity. The tyre decision needs to be set
into the context of a string of ominously protectionist policies which started within weeks of the
inauguration with a nasty set of “Buy America” provisions for public-works contracts. The president
watered these down a bit, but was not brave enough to veto. Next, the president stayed silent as
Congress shut down a project that was meant to lead to the opening of the border to Mexican trucks,
something promised in the NAFTA agreement of 1994.
Besides these sins of commission sit the sins of omission: the president has done nothing at all to
advance the three free-trade packages that are pending in Congress, with Colombia, Panama and
South Korea, three solid American allies who deserve much better. And much more serious than
that, because it affects the whole world, is his failure to put anything worthwhile on the table to help
revive the moribund Doha round of trade talks. Mr Bush’s tariffs, like the Reagan-era export
restraints on Japanese cars and semiconductors, came from a president who was fundamentally
committed to free trade. Mr Obama’s, it seems, do not.
America is needed to lead. The global trading system has many enemies, but in recent times the man
in the White House could be counted as its main champion. As the driver of the world’s great
opening, America has gained hugely in terms of power and prestige, but the extraordinary burst of
growth that globalisation has triggered has also lifted hundreds of millions out of poverty over the
past few decades and brought lower prices to consumers everywhere. The global recession threatens
to undo some of that, as country after country is tempted to subsidise here and protect there. World
trade is likely to slump by 10% in 2009, and a report from the Geneva-based World Trade Alliance
claimed this week that, on average, a G20 member has broken the no-protectionism pledge once
every three days since it was made. For Mr Obama now to take up the no-protection cause at the
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G20’s forthcoming meeting in Pittsburgh would, alas, be laughable. But if America does not set an
example, no one else is likely to.
Nor is the potential fallout from Mr Obama’s wrongheaded decision limited to trade. Evidence of a
weak president being pushed leftward might cause investors to worry whether he will prove similarly
feeble when it comes to reining in the vast deficits he is now racking up; and that might spook the
buyers of bonds that finance all those deficits. Looming large among these, of course, are the
Chinese. Deteriorating trade relations between the world’s number one debtor and its number one
creditor are enough to keep any banker awake at night. *…+
Text 5. Ford sells Volvo to Chinese group
Richard Wachman guardian.co.uk, Sunday 28 March 2010
Volvo car on display at a shopping mall in Beijing where 300,000 could be
produced at Zhejiang Geely's factory.
A Chinese company is buying Volvo from Ford for £1.2bn, making it China's
biggest purchase of an overseas carmaker and one of its largest foreign
investments. The acquisition of the loss-making Swedish unit by Zhejiang Geely
Holding Group underscores China's arrival as a force in the global car industry,
as well as flagging up its ambition to become a big player on the world business
stage.
China has more than £1.4tn in reserves and its companies are investing heavily overseas, particularly
in energy and commodities in an attempt to secure supplies for its fast-growing economy.
Yesterday's announcement demonstrates the ambition of the Chinese to snap up western consumer
industries and so gain greater industrial expertise. Geely is planning a factory in Beijing that will make
300,000 Volvo-branded cars a year, or as many Volvos for China as are now made abroad for
foreigners. The Chinese company will gain access to Volvo's technology, as well as an image boost
because of the brand's premium status in China, said Vivien Chan, an analyst at SinoPac Securities.
China raced past the US to become the world's top auto market last year, with sales surging by 46%
to a record 13.6m vehicles. It is keen to move into western markets but has so far lacked the
technology and brand recognition to do so. The Volvo deal should help it to get around some of
those obstacles more quickly. Unlike the abortive attempt by General Motors (GM) to sell its gas-
guzzling Hummer brand to Tengzhong, a little-known Chinese machinery maker, Geely's Volvo
purchase has been backed by Beijing. The company is paying about £1bn of the asking price in cash.
Volvo may get a boost from Beijing's plan to support domestic brands and replace Volkswagen's Audi
A6 as Chinese state officials' car of choice. "We want to stabilise and enhance the traditional markets
in Europe and North America, and at the same time develop Volvo in emerging markets, including
China," Geely's chairman, Li Shufu, said.
Today's deal ends nearly two years of talks with Geely over Volvo – the last sale from Ford's luxury
brands division, which used to include Aston Martin, Jaguar and Land Rover. "Today represents a
milestone in the history of Geely," Li said, adding that Volvo Cars would remain a separate company
with its own management team based in Sweden. Such a deal would have been nearly unimaginable
a few years ago for the Chinese carmaker, which on 2009 forecasts has a turnover of only 16% of
Volvo's, and has just over half the workforce. It highlights in particular the opportunities that have
emerged from the financial crisis for smaller players. For example, Spyker, the tiny Dutch sports car
maker, clinched a deal in January to buy Saab from GM.
Geely said that it had secured all the necessary financing to complete the deal, though it remained
open to a possible loan from the European Investment Bank. Addressing questions regarding Geely's
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plans to keep production lines running in Europe, Li said that it was important Volvo stayed close to
supply centres: "I have a deep belief that the manufacturing footprint in Gothenburg and Belgium
will be preserved in the longer term." Volvo labour unions, which had been critical of the proposed
sale and complained about a lack of information, said that they now backed the takeover.
The deal, which both sides aim to close in the third quarter, will help free up cash for the number-
two US carmaker and enable it to focus on its core Ford brand. Geely was named by Ford as the
preferred bidder for Volvo in October 2009. The Chinese carmaker clinched the company at a price
tag well below the $6.5bn Ford paid for it in 1999. Ford's finance director, Lewis Booth, said: "We
think it's a fair price for a good business."
Text 6. Status symbol
An obscure Chinese carmaker buys a famous but ailing Swedish one
Mar 31st 2010 | From The Economist print edition
If opposites attract, Ford's sale of Volvo to a Chinese upstart, Geely, for $1.8 billion ought to be a
marriage made in heaven. Sweden's Volvo is the epitome of good middle-class taste; its slightly dull
but hugely safe and practical cars were, in better days, the default choice on many a suburban
driveway in America and Europe. Geely, on the other hand, is barely known outside China, partly
because its range of mainly cheap, small cars is not yet capable of meeting the rich world's more
stringent safety and environmental regulations. But it is ambitious. The deal, which was signed on
March 28th, brings to an end protracted negotiations by Ford to sell the last of the European
premium brands it acquired in a spell of expansionary hubris starting at the end of the 1980s.
Having disposed of Aston Martin and Jaguar Land Rover, Alan Mulally, the chief executive brought in
from Boeing in 2006, was determined to offload Volvo too, which lost $1.3 billion last year and sold
only 335,000 cars. Although Volvo this year appears to have turned a corner and is operating at
“sustainable levels”, Mr Mulally's thus far successful “One Ford” strategy involves concentrating all
the firm's financial and managerial resources on reviving the Blue Oval.
For Geely, acquiring Volvo is both an extraordinary statement of intent and a huge gamble. The deal
could help Geely realise the dream of its founder, Li Shufu, the self-styled Henry Ford of China, to
become a big international carmaker. Even though Ford has done its best to ring-fence its intellectual
property, Volvo has plenty of its own, especially in the critical area of safety, to which Geely will have
access and which will lend credibility to its cars as its range expands in both scope and scale. It will
also learn from Volvo about how to run a global supply chain and an international dealer network.
But Mr Li believes that Volvo too will benefit. Most important, it will realise its potential in China, the
world's biggest and fastest-growing vehicle market. Fifteen years ago Volvo outsold Audi in China,
but these days the German premium brand's sales in the country dwarf Volvo's, which were only
22,000 cars last year. He also thinks that away from Ford and the Premier Automotive Group that
used to house its upmarket brands, Volvo will have freedom to go into market segments that were
previously closed to it because they were occupied by models from Jaguar, Land Rover or Ford itself.
Volvo may still struggle to become a genuine competitor for Audi, BMW and Mercedes, which define
and dominate the premium end of the market, but Geely should give it a big presence in China.
Volvo's main production sites will continue to be in Sweden and Belgium, but Geely has plans for two
factories and an engine assembly plant in China. These, combined with Geely's clout in distribution,
could help Volvo nearly double its sales to 600,000 by 2015, Mr Li believes. But what should really
ensure Volvo's future success in China is the government's commitment to it. Although Geely is that
rare thing, a privately owned Chinese carmaker, it could not have raised the money needed to buy
Volvo (along with the $900m it is planning to inject in working capital) without the support of state-
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owned banks and provincial governments' investment funds. The presence at the signing ceremony
in Gothenburg of Li Yizhong, the minister of industry and technology, was significant: Geely is buying
Volvo, but so too is China. *…+
Text 7. US Prevails in Trade Dispute With China
By SEWELL CHAN, New York Times, October 22, 2010
WASHINGTON — The United States claimed victory Friday in a trade dispute with China, after a
World Trade Organization panel largely upheld tariffs that were imposed on an array of Chinese-
made steel pipes, tires and other products during the Bush administration. China had used a number
of technical arguments in a September 2008 challenge to antidumping duties, which are supposed to
compensate for unfair pricing and countervailing duties that are used to offset improper government
subsidies. But a W.T.O. dispute settlement panel rejected most of those arguments.
The Bush administration announced levies on $200 million of steel pipe shipments from China, South
Korea and Mexico in July 2008, a month after imposing similar countervailing duties involving a
different kind of steel pipe. The Obama administration has defended those decisions. “This is a
significant win for American workers and businesses affected by unfairly traded imports,” said the
United States trade representative, Ron Kirk. “This case makes clear that the Obama administration,
including U.S.T.R. and our colleagues at the Department of Commerce, will vigorously defend the
application of our trade remedy laws.” The duties that were upheld on Friday had been imposed on a
variety of specialized goods: circular welded pipe, certain pneumatic off-road tires, light-walled
rectangular pipe and tube and laminated woven sacks.
China’s challenge revolved around many technical questions, including whether state-owned
enterprises and state-owned commercial banks could be properly considered public bodies that
provide subsidies. The ruling comes at a time of increasing tensions over currency and trade between
China and the United States. The Obama administration has agreed to investigate a complaint
brought by the United Steelworkers over China’s support for its clean energy industries, and is
concerned about Chinese efforts to block exports shipments of valuable minerals known as rare
earths.
“These findings are especially important at a time when the United States is vigorously implementing
W.T.O.-consistent tools to address China’s unfair trade practices and to address global imbalances,”
said Representative Sander M. Levin, Democrat of Michigan, one of the most outspoken House
members on China’s decision to hold down the value of its currency, the renminbi. “We should not
let the possibility of meritless allegations of W.T.O. inconsistency prevent us from standing up for
U.S. workers and businesses.” The W.T.O. panel was established in January 2009 and held hearings in
July and November of that year. Both China and the United States have up to 60 days to appeal the
panel’s ruling, which ran to 283 pages and was published on the Web site of the W.T.O., which is
based in Geneva. China joined the organization in 2001.
In a separate case, the United States International Trade Commission, an independent federal agency
that assesses whether imports unfairly damage American industry, on Friday authorized the
Commerce Department to impose both antidumping and countervailing duties on coated paper from
China and Indonesia that is used in sheet-fed presses. The commission found that the papers, which
are used to produce high-quality graphics, had been unfairly subsidized and sold in the United States
at less than market value. Senator Sherrod Brown, an Ohio Democrat who had submitted testimony
to the trade commission in the coated-paper case, applauded the ruling. “American producers face
an inexcusable flood of dumped Chinese paper — subsidized from 10 to 15 percent of product cost,”
he said after meeting with workers at Smart Papers, a coated-paper manufacturer in Hamilton, Ohio.
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Mr. Brown said the decision “shows why rigorous trade law enforcement is critical to the economic
security of our workers and viability of domestic manufacturing,” but he also argued that China’s
currency policies should be considered in future trade remedy cases.
Text 8. Complex Future for China Brazil Trade Relations
By Elenice Portz and Xingjian Zhao Published: 2011-03-16
http://www.afponline.org/pub/res/news/Complex_Future_for_China-Brazil_Trade_Relations.html
In 2009, during the midst of the global economic crisis, China quietly displaced the United States as
Brazil’s top trade partner. According to Brazil’s Ministry of Development, Industry and Foreign Trade,
bilateral trade between the two emerging BRIC nations exceeded $50 billion USD during the first 11
months of 2010 while Chinese exports to Brazil increased 62 percent, continuing a strong upward
trend. China now accounts for more than 12 percent of Brazil’s exports. In comparison, bilateral
trade amounted to only $36 billion USD in 2009, despite tripling in value over the past five years.
During a one-day summit of BRIC nations in Brasília last April, Chinese President Hu Jintao noted that
intra-BRIC cooperation “now faces both valuable opportunities and severe challenges,” and that BRIC
nations “should set clear objectives for cooperation” to advance their common interests “from a
strategic height.”
True to Hu’s words, both China and Brazil have, in recent years, been diligently tapping into a wealth
of collaborative opportunities. Today, China is not only Brazil’s largest trade partner, but also its
largest exporting destination and second-largest importer. Both China and Brazil have much to offer
each other. Brazil has an abundance of natural resources, including energy supplies, minerals, and
raw materials, all of which are in great demand in China’s booming marketplace. China’s relatively
low production costs and developed industrial infrastructure, on the other hand, offer Brazil a
steady, cheap, and plentiful supply of manufactured goods. Consequently, most Brazilian exports to
China are in the form of commodities, while most Chinese imports to Brazil are of manufactured
products.
Brazil’s growing reliance on the export of raw materials to China has been a subject of concern,
despite its high profitability due to a commodity boom that is being fueled by high Chinese demand.
In 2009, for example, raw materials and soybeans accounted for 77 percent of Brazil’s total exports
to China, and 41 percent of Brazil’s total exports. These represent significant increases from 2002,
when such primary exports made up less than two-thirds of Brazil’s exports to China, and only 22
percent of all exports.
The growing homogeneity of Brazilian exports to China, in conjunction with the increasing share of
such exports as a percentage of Brazil’s total trade volume, have led some to believe that this trend
could fuel infrastructure development in China at the expense of deindustrialization in Brazil. Yet,
between 2002 and 2009, the dollar value of Brazil’s exported manufactured goods increased two-
fold, reaching $67.3 billion USD by the end of that year. At the same time, manufactured and semi-
manufactured goods made up 57 percent of Brazil’s total exports in 2009. This sustained strength by
Brazil’s secondary exports market helps ease concerns about the country’s growing dependence on
the export of commodities. It also shelters the Brazilian economy from a potential terms-of-trade
shock.
On the other hand, China has also been pouring liquidity into Brazil’s energy sector as part of its
efforts to increase control over Latin American oil and energy supplies. In May 2009, for example,
China agreed to lend $10 billion USD to Brazil’s oil giant Petróleo Brasileiro (Petrobras) in exchange
for a guaranteed supply of oil over the next decade. Moreover, in December of that year, state-
owned PetroChina signed a memorandum of understanding with Petrobras to invest in ethanol
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production projects in Brazil, with the specific aim of exporting ethanol to China as an alternative
energy source.
More recently, the East China Mineral Exploration and Development Bureau agreed to pay $1.2
billion USD to acquire Itaminas Comercio de Minerios, a major Brazilian iron ore miner based in
Sarzedo. Chinese firms are also actively involved in bidding for a 40 percent stake in an untapped
Brazilian offshore oil field being sold by Norway’s Staoil. The bilateral agreements that were signed at
the BRIC summit in Brasília last April were specifically aimed at boosting trade and energy
cooperation between the two countries, and include provisions for the construction of a Chinese
steel plant in Brazil.
The long-term economic benefits of China and Brazil’s trade relationship are substantial, and the
nature of this important bilateral relationship will become an important part of the domestic policy
agendas of both major BRIC nations. Problems, such as Brazil’s growing bilateral trade deficit with
China, as well as the threat of deindustrialization from trade imbalances caused by an
overabundance of Brazilian commodities exports, pose substantial risks to the relationship’s long-
term growth. However, the economic climate remains promising, while the level of economic
integration is still shallow. Brazilian exports do not directly compete with Chinese exports in most
markets, and China’s rapid growth prospects will continue to usher in new opportunities for Brazil’s
energy and commodities sectors.
Consequently, Brazil’s primary challenges remain in its ability to enhance the value of its energy
supplies and its raw materials exports to satisfy Chinese demands. The administration of Brazil’s new
president, Dilma Rousseff, must confront these difficult challenges this decade in order to properly
manage the risks and opportunities of her country’s growing trade integration with China.
Elenice Portz and Xingjian Zhao are attorneys at Diaz Reus & Targ.
Text 9. Kraft and Cadbury - Chocs away
Kraft wins a battle for Britain’s Cadbury and will become the world’s biggest
confectioner
Jan 19th 2010 - From Economist.com
The intervention of a government minister in Kraft’s battle to buy Cadbury
says much about the strength of British feeling for their favourite chocolate-maker. The American
food giant’s sweetened offer, too toothsome to turn down, was accepted by Cadbury’s board on
Tuesday January 19th. Kraft will pay £11.9 billion ($19.4 billion) for Cadbury in cash and shares, some
50% more than the firm’s value before the bidding started in September. Yet last week Britain’s
business secretary, Lord Mandelson, warned a big group of the country's institutional investors—
doubtless fixing those from Cadbury with a narrowed eye—against the dangers of short-termism.
A month earlier he had promised Kraft that the British government would scrutinise a foreign buyer
to ensure that “respect” was paid to Cadbury’s proud heritage. The firm has been catering to the
British for 186 years. In a country that cheerfully waves in foreign buyers for its businesses the threat
of “huge opposition” from the government was an unusual change of tone. Kraft too received some
words of wisdom on its attempted takeover from a senior American, although the advice of Warren
Buffet was of a more practical kind. His investment firm, Berkshire Hathaway, is a big shareholder in
Kraft. Reckoning that Kraft’s shares are undervalued he counselled the firm’s bosses not to let their
“animal spirits run high” and overpay for Cadbury.
Irene Rosenfeld, Kraft’s chief executive, seems to have listened. Shortly before a deadline imposed
by British takeover rules, Kraft upped its bid for Cadbury by boosting the cash portion significantly
while reducing from 370m to 265m the number of new shares it will issue to complete the deal.
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Kraft’s share price got a well-timed boost last week after the firm forecast that its profits for 2009
would be even better than earlier expected.
Ms Rosenfeld was quick to acknowledge on Tuesday that Kraft has “great respect for Cadbury's
brands, heritage and people”. Perhaps that will allay Lord Mandelson’s fears. Cadbury's unions
opposed the move, worried about job cuts, but the firm's board has reasoned that the price is right
to bring together the two companies to create the world’s biggest confectioner. Earlier the board
had insisted that Cadbury was better off alone. Now Cadbury will become part of the “global
powerhouse” that Ms Rosenfeld envisages.
The two businesses are strong in different markets. Kraft has little presence in Britain’s confectionery
market, where Cadbury is strong, but it has thriving businesses in mainland Europe, where Cadbury
has made few inroads. Cadbury has a booming chewing-gum business, particularly in Europe and
Latin America, an area where Kraft has little expertise. And between them they can make up lost
ground in China, where Mars, the world’s second-placed sweet-maker when the deal goes through,
holds the upper hand. The deal is also set to yield cost savings of $675m a year.
Other potential bidders still have the chance to make a more appealing offer but it seems that Kraft’s
touted rivals will remain silent. America’s Hershey, smaller even than Cadbury, seems unlikely to be
able to muster the financial forces to upset Kraft’s bid. Nestlé ruled itself out of the running by after
buying Kraft’s American Pizza business for $3.7 billion early this month. Ms Rosenfeld may yet find
the takeover of Cadbury a tricky process. In dealing with potential rivals, satisfying Cadbury’s board
and soothing Mr Buffet, Kraft’s boss has proved she is a deft operator. If Lord Mandelson is harder to
assuage she might try sending him a Chocolate Orange.
Text 10. Europe's textile war with China – and itself
Adapted from The Economist Global Agenda, Aug 25th 2005
Ever since the World Trade Organisation's longstanding system of textile quotas expired at the
beginning of 2005, powerful textile lobbies in the US and the EU have lobbied for legislative action to
stop the flood of cheap Chinese apparel from swamping their businesses. The EU tried to resolve the
issue in June, when it signed an agreement with China imposing new quotas on ten categories of
textile goods, limiting import growth in those categories to between 8% and 12.5% a year. The
agreement, which runs to 2007, was to give domestic manufacturers time to adjust to their new
competitive environment.
Alas, no one seems to have consulted Europe's retailers, who had already placed orders for
mountains of new goods from China. One month after the deal was agreed China exceeded its
import quotas for pullovers. Less than a month after that, men's trousers hit their quota, followed
rapidly by shirts, bras, or T-shirts. Millions of clothes are now piling up in warehouses and customs
checkpoints, while the prospect of shortages has consumers and shop-owners up in arms. The battle
therefore pits manufacturers against retailers and consumers.
The European Commission, the EU's Brussels-based executive, is trying to reach a deal that would
please manufacturers, retailers and the Chinese. Meanwhile, EuroCommerce, a lobby group for
retailers, wholesalers and trading firms, is requesting Peter Mandelson, the EU trade commissioner,
to let in all the goods that were ordered before the quotas came into effect. Mr Mandelson has
acknowledged a "serious glitch" in the implementation of the textile quotas, and is seeking a
pragmatic solution. But the pressure from retailers is matched by intense lobbying by textile
manufacturers and governments of countries with big textile industries, such as France, Spain and
Italy. Mr Mandelson said that the quotas would not be revoked.
Page 13 of 39011-IBE-Siegen-Cases.docx
When China became a member of the WTO in 2001, it did so under special terms that allowed
importing countries to impose short-term "safeguards" on Chinese goods until 2013 if they could
show those goods to be causing "material injury" to domestic producers. Separate measures for
textiles also allow safeguards to be imposed whenever imports threaten "market disruption". The
expiry of the previous quota system made it inevitable that countries with big textile industries
would press for quotas to be imposed. Supporters of the quotas are vociferous and politically well-
connected in their home countries. But government ministers from the Netherlands, Denmark,
Sweden, Finland and Germany have all spoken out against the quotas, and one German businessman
has filed suit in Germany's Constitutional Court, claiming that the barriers are causing his firm an
unlawful loss of €1m in income.
Then again, at best, the quotas are only delaying the inevitable. It is hard to see how rich-world
workers can compete with the low wages that their counterparts in poor countries are willing to
accept. The low-tech, low-skill textile industry seems likely to continue bleeding jobs to the
developing world. It is estimated that France lost about a third of its jobs in the sector between 1993
and 2003. Italy, whose relatively unskilled manufacturing base has long depended on a cheap
currency to make its exports competitive, has seen its firms hit hard since it abandoned the lira for
the euro. It is not clear either how much the quotas on Chinese goods will help domestic producers,
when there are so many willing firms in low-wage countries like Bangladesh and Costa Rica waiting
for an opportunity. Indeed, an EU official, quoted in the London Guardian, even claimed, a touch
implausibly, that the action against China was designed to help workers in those very countries.
Text 11. Chinese light-bulb imports spark EU controversy
http://www.euractiv.com/en/trade/chinese-light-bulb-imports-spark-eu-controversy/article-
166234
Published: Wednesday 29 August 2007
A row is brewing over a proposal by UK Trade Commissioner Peter Mandelson to scrap EU anti-
dumping duties of up to 66% on energy-efficient light bulbs imported from China, as his German
counterpart, in charge of industry, Günter Verheugen, attempts to block the move. EU trade chief
Peter Mandelson is pushing for the punitive tariff to be lifted completely – a move that could see the
price paid by consumers cut by around two thirds. He has the support of a majority of European
producers, including the Dutch electronics group Philips, which outsources the manufacturing of its
power-saving bulbs to China.
But German industry Commissioner Günter Verheugen is opposed to the move, claiming that it could
cause job losses for Germany's national light-bulb manufacturer Osram, as below-cost imports from
China flow into the EU. He is expected to call for a compromise in the form of a two-year extension of
duties. However, a number of European companies, including Dutch electronics group Philips and
Swedish retailer Ikea, who import large quantities of power-saving bulbs from China, have criticised
the move. And an Italian lighting firm, Targetti Sankey, has announced that it would be challenging
the Commission's decision in court on the basis that its investigation was flawed. If it wins its case,
not only would the extension be declared void, but importers could also be entitled to "claim back
from the EU hundreds of millions of euros in duties paid since 2001", according to Targetti lawyer
Maurizio Gambardella.
Earlier in July, a spokesperson for Mandelson dismissed such claims, saying that it was purely "a
question of commercial competition between two European companies" and that "Osram is seeking
to continue anti-dumping measures because they hit Philips proportionately harder". However,
according to the Foreign Trade Association (FTA), an umbrella group of importers and retailers in
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Europe, Verheugen could have the support of a number of his colleagues, such as Commission
President José Manuel Barroso and Energy Commissioner Andris Piebalgs.
FTA Legal Advisor Stuart Newman pointed to the "absurdity" of maintaining tariffs at a time when
the EU is attempting to increase the use of green technologies in order to achieve its dual goal of
cutting energy use and CO2 emissions by 20% by 2020. Lighting accounts for around 14% of
electricity use in the EU and experts say that replacing traditional light bulbs with power-saving ones
could offset CO2 emissions by 25 million tonnes per year. Furthermore, the Commission is currently
looking to phase out ordinary light bulbs completely (EurActiv 06/06/07) and European
manufacturers are thought to be unable to meet total demand in this growing market. "We cannot
believe that it is in the interests either of European industry or of consumers to continue these
measures," Newman told EurActiv.
But the issue is also seen as a test case for the future of the EU's anti-dumping policy, currently under
review (EurActiv 08/12/06). A number of EU nations fear that it could be used as a precedent in
future cases for the EU to give more weight to the interests of companies producing or sourcing
goods in countries with cheap labour costs, such as China, than to those with production based in
Europe – a move that manufacturing countries such as Spain, Italy and a number of new member
states are likely to resist.
Background:
The EU, like most other importing economies, operates a system of trade defence instruments (TDIs).
These instruments - anti-dumping, anti-subsidy and safeguard measures - allow the EU to defend its
producers against the following kinds of distortions in competition that are harmful to the European
economy:
"Dumping" – where third-country companies export goods at below production-cost prices, as the EU
claimed was the case regarding imports of shoes from China and Vietnam (EurActiv 24/03/06);
"Subsidisation" – where non-EU exporters benefit from internationally illegal subsidies allowing them
to produce a good excessively cheaply; as in the EU case against South Korea for unfair subsidisation of
the semi-conductor producer Hynix, and;
"Large and sudden surges of imports of goods into the EU" putting European industries at risk; as was
the case when WTO limits on imports of textiles from China to the EU were removed, causing a sudden
flood of Chinese clothes to enter the EU (EurActiv 18/05/05).
During the ten years that the EU has operated its current trade-defence system, the global economy
has changed significantly, with business and workers' interests increasingly linked to production
outside the EU. The rise of China as an export power has underlined a split within the EU between those
that are reaping the benefits of cheap imports and those that are under pressure from heightened
competition.
These conflicting interests and divisions among EU countries have made it increasingly difficult to
define what constitutes "Community interest". Trade Commissioner Peter Mandelson has, already
twice this year in disputes over imports of Chinese textiles and leather shoes, found himself stuck
between free marketeers such as Britain, Germany and Sweden – which said that imposing TDI in these
cases was protectionist and would raise prices for consumers – and manufacturing countries such as
Italy, France, Spain and Poland, which claimed that imports of under-priced Asian goods were putting
their industries at risk and threatening thousands of jobs (EurActiv 04/10/06).
In order to avoid such situations in the future, the Commission, on 6 December 2006, launched a full-
scale review of its trade-defence system, with a Green Paper that asks questions such as whether the
criteria for using TDIs need to be toned down, whether other measures could be used, and whether the
interests of importers and consumers should be given more consideration in investigations.
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